Addressing Delaware’s Housing Challenges: A Look at Legislation and Market Dynamics

 By: Jane Brady, Chair, A Better Delaware

Delaware is estimated to have approximately 20,000 fewer housing units than the demand requires.  That often means that there is a shortage of affordable housing, creating a stagnant market and homelessness.

There are a number of issues that have affected the “inventory” of housing in Delaware. One has been the incredibly low mortgage rates for the past few years. Homeowners are reluctant to sell because they will have to pay higher rates for their new purchase. Second, there is not sufficient diversity of the housing units available for purchase. Some people see their dream in a single-family home, others in a condo or townhome, and still others in a rental of any one of the above.   We lack that diversity in sufficient numbers to meet demand.

And the costs are high.  According to Bankrate, which has a calculator to determine how much home you can afford, if you make $80,000 a year and put down $20,000 on a house, the best affordability is a $283,000 home. The maximum that you should attempt to purchase is $353,000. The median price for a single-family home in Delaware, according to Bankrate is $396,000, more than about half the states.   The Joint Center for Housing Studies of Harvard University found that, in 2022 the median price of a single-family home was 5.6 times the median household income. That’s higher than any other point in their records.  Prior to the pandemic. It was 4.1 times median income. The recommended rate, according to the Center, is 2.6. Low interest rates for an extended period and limited inventory produced higher prices, and wages were not keeping pace. Fanny Mae home purchase sentiment index indicates that 77% of consumers surveyed believe now is a bad time to buy a home.

According to marketplace.org from 1984 to 2023 the median cost of a new home rose at double the rate of the overall price inflation.  And, according to Cotality’s Chief Economist Selma Hepp, home price growth is expected to continue, and it is “especially apparent in the Northeast and Midwest, where the severe lack of inventory is helping prop up home prices.”

Housing construction costs are high as well, and the regulations regarding what needs to be included in the construction of building structures are ever increasing, including infrastructure costs, climate accommodation and material requirements.  There is an inherent bias in most buyers against density (apartments multi-story, multi-unit structures, etc.) because of traffic and infrastructure demands, and there is an inherent bias in most laws and regulations toward density.

So, what is the General Assembly doing to address this issue? Well, recent legislation would permit the construction of additional dwelling units (ADUs) to be added to current housing structures or property. Picture an in-law suite, but it does not have to be connected to the existing house.  Little public comment has been made on this issue at this point but look for objections to any entirely independent structures.

Most of the General Assembly’s effort has been directed at rentals.  One bill, SB150, would create a fund to provide loans to very low-, low-, and moderate-incomes, the elderly and individuals with disabilities.   But several other efforts are misguided and will be counterproductive.

HB 455 establishes rent controls, requires the Delaware State Housing Authority (DSHA) to calculate a fair market rent (FMR) and determine consumer price index, urban (CPI-U) for each county, and requiring landlords to report to the DSHA specific data regarding all their rental units.  Rent controls have been repeatedly shown to restrict inventory, the exact opposite of what we need to occur, and the bill is expensive – costs not only for the landlords, but also the DSHA and staff needed to comply, monitor and enforce the regulations.  A related bill would permit tenant who is in default of payment of rent to remain in the unit if the tenant pays all due at any time before the actual execution of the eviction order. There is no provision for recovery of costs to the landlord who has to bring the action.  Both these bills will have a chilling effect on the willingness of the many, smaller landlords who do not have a large number of units and who make a little extra money renting.

Finally, there is a bad idea on the horizon. If you do not like what Venice Beach and San Francisco look like today, you need to oppose HB 135, or you are potentially looking at Delaware tomorrow.  HB 135, and I quote directly from the synopsis, “permits an individual experiencing homelessness to conduct life sustaining activities in public, so long as such activities do not obstruct the normal movement of pedestrian or vehicular traffic in such a manner that creates a hazard to others, unless adequate alternative indoor space is available to the individual in a given jurisdiction and has been offered to the individual, including transportation for the individual and their belongings. 2. Mandates that an individual experiencing homelessness receive the same degree of protection for personal property stored in public places as personal property stored in a private dwelling, which includes protections against unreasonable search and seizure. 3. Prohibits the State or local jurisdiction from requiring an individual experiencing homelessness to move a motor vehicle or a recreational vehicle provided that the vehicle is parked on public property and the vehicle is not parked in a position to obstruct the normal movement of traffic or create a hazard for other traffic upon the highway. 4. Provides that, if a motor vehicle or recreational vehicle must be moved because the vehicle is obstructing normal movement of traffic or creates a hazard to other traffic on the roadway, the individual experiencing homelessness must be permitted to relocate the vehicle before a parking ticket is issued, or the vehicle is towed.”

This is not the best use of resources for those who find themselves homeless – whether due to finances, mental health, substance abuse issues or abandonment. Endorsement of living on the street outside of our homes, stores and doctors’ offices should not be a government function.  And enforcement will be a nightmare. What if an individual is not with the vehicle that is obstructing normal movement when the traffic is piling up behind it? What if it is towed and then the officer discovers it was owned or occupied by a homeless person? What possible protection can property have, stored in public, that would be equivalent to the protection property stored under key or locked in a safe in a home? Whose obligation is it to assure that property is protected?

Delaware has some challenges meeting the demand for housing, there is no question. But reduced regulations can reduce building costs, reasonable rental provisions will encourage expanded supply, and laws providing incentives to diversify our inventory will meet more of the market demand.

Jane Brady serves as Chair of A Better Delaware. She previously served as Attorney General of Delaware and as a Judge of the Delaware Superior Court.